NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation
An investor switches units from one scheme to another scheme of the same mutual fund house. How is this switch treated for income tax purposes?
A switch between schemes, even within the same fund house, is treated as a redemption of the original units and a fresh purchase of new units. Capital gains or losses on the redeemed units are therefore computed at the time of the switch.
- AAs a redemption from the first scheme and a fresh purchase in the second, so capital gains may ariseCorrect
- BAs a non-taxable event because the fund house is the same
- CAs taxable only if the switch is to a debt scheme
- DAs a transaction taxed only when the second scheme is redeemed
Explanation
A switch is treated as a redemption of units in the original scheme followed by a purchase in the new scheme. Capital gain or loss on the units redeemed is therefore computed at that time, even though the AMC is the same.
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